Satellite TV tax raises protests

Saturday

Jun 27, 2009 at 6:00 AM

By Martin Luttrell TELEGRAM & GAZETTE STAFF

Gail G. Kimball switched from cable television to satellite TV in February after having problematic service. The Whitinsville resident has been satisfied with the program offerings and service, but is troubled by the possibility that she will have to pay a 5 percent sales tax on top of her monthly bill.

She is one of more than 275,000 satellite television subscribers in the state who would be affected by a provision inserted into the fiscal 2010 state budget now waiting Gov. Deval L. Patrick’s signature. The language was added to the budget drafted by the Legislature last week, touching off a campaign by satellite providers to scuttle the proposed tax, and a war of words between cable and satellite TV providers.

State Sen. Stanley C. Rosenberg, D-Amherst, who added the tax provision, said the state could benefit from as much as $26 million annually in tax revenues needed to save threatened state services.

But satellite industry spokesmen and subscribers say that tax is not also applied to cable providers and is unfair.

“I don’t think that’s right,” Ms. Kimball said. “I live with my 92-year-old father, and he likes (satellite TV). We would probably stay with it and pay the tax. I like the movies and the Christian channel. I’m old-fashioned.”

Michael J. Goodman likes his movie channels, and for the last 15 years has subscribed to Dish Network or DirectTV satellite services to get them. And the former chief financial officer likes to keep an eye on costs, so when he learned that a 5 percent sales tax on his television service could be signed into law, he was rankled.

“This is a push by cable,” said the Mendon resident.

He said he spends about $130 a month for his DirectTV service, which includes eight movie channels. He learned of the impending tax through the program guide beamed to his television by the company.

“I’m a financial person, and I’m conscious of cost,” he said. “I’m not going to change (to cable) if it goes through. Five or seven dollars isn’t going to change my standard of living. But I’m all for fairness. I’m incensed that it’s not for cable as well.”

Mr. Patrick has until Monday to act on the budget, and can veto line items that he does not want. A spokeswoman for the Executive Office of Administration and Finance said the governor has not made any public statement on the tax, and is likely to take until Monday’s deadline to act on the proposed budget.

Andrew Reinsdorf, vice president of government affairs for DirectTV in Washington, said the company launched an informational campaign against the tax, urging subscribers to contact their legislators, even flying a company blimp over Fenway Park and the Statehouse, flashing messages against the provision.

DirectTV has 275,000 subscribers in the state, 42,700 in Worcester County among them, he said.

“This is a tax on a service that comes through the ether to their televisions,” Mr. Reinsdorf said. “… This is a punitive tax. Cable chooses not to serve some rural communities. Those residents are being penalized for having no choice.”

Denver-based Dish Network Corp. issued a statement saying the tax would be discriminatory, and calling on the governor to veto the proposal. Dish Network does not discuss local subscribers, and has nearly 13.6 million subscribers nationally, a company spokesman said.

Paul R. Cianelli, president of New England Cable & Telecommunications Association, could not be reached by telephone, but e-mailed a statement saying that satellite providers have enjoyed a tax exemption for years that he said is costing taxpayers $25 million a year.

“They don’t even employ people in Massachusetts,” the statement said in part. “They ought to be ashamed of themselves for waging a slash-and-burn campaign to protect their special tax break at a time when state and local governments are being forced to cut things like education and raise taxes.”

Mr. Rosenberg said that legislators did not choose one type of provider over another for a new tax, but argued that cable providers already pay so-called franchise fees in the communities they serve, which is up to 5 percent of their gross revenues. That money is used to provide local access programming, which satellite does not provide, and to reimburse cities and towns for disruptions caused by utility work.

“You have an inequality here,” Mr. Rosenberg said. “Cable subscribers are paying more for their bill. Satellite has a lower cost to consumers because they provided none of this (local access). The cable franchise fee is tied to municipal public good.”

He said the tax revenue would go into the state’s general fund to be used for public services already threatened by lower tax revenues.

Charter Communications Inc. spokesman Thomas Cohan said the cable company pays $1.4 million a year to the city of Worcester in franchise fees. He said the company employs about 600 in the county, while satellite companies employ some contractors locally.

“All their revenues go out of state,” Mr. Cohan said. “We think this levels the playing field among providers and is more fair to cities and towns. … Charter supports the sales tax.”

State Rep. Vincent A. Pedone, D-Worcester, said constituents and people from outside his district have contacted him as a result of DirectTV’s campaign. He said that satellite television is a relatively new business and technology in the state, and should be included in the tax code. He said that satellite providers have not had to pay anything comparable to franchise fees.

“I look at it as a product sold in Massachusetts that should be taxed,” he said. “As for cable, the franchise fee stays locally. What we didn’t want to do is have a franchise fee and add a sales tax. I feel it’s fair and reasonable to tax satellite 5 percent and not tax cable.”

Mr. Reinsdorf said the franchise fee is a contract cable providers take on to maintain a “messy infrastructure.” He likened the tax proposal to taxing people who have fled cable television.

“They’ve chosen to pass those fees along to their consumers,” he said. “The analogy here is like asking airlines passengers to subsidize the tax for Amtrak tracks from Boston to Washington.”